PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB3305 Lake Titikaka Local Sustainable Development Project Name Public Disclosure Authorized Region LATIN AMERICA AND CARIBBEAN Sector Other industry (25%), Sanitation (20%), Other social services (25%), Water supply (15%), Solid Waste Management (10%) Project ID P101426 Borrower(s) GOVERNMENT OF BOLIVIA Implementing Agency Vice Ministry of Tourism Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared November 2, 2007 Date of Appraisal October 29, 2007 Authorization Date of Board Approval December 20, 2007 Public Disclosure Authorized 1. Country and Sector Background Bolivia’s options for economic development are largely defined by its geography, nowhere is this more apparent than Lake Titikaka1. The area’s striking geography has resulted in the world’s highest navigable Lake, with unique landforms, flora, and fauna. Lake Titikaka is an important ecosystem and a world- class attraction2. In 2005, tourism was the fourth most important component of Bolivia’s GDP, with a share of 4.6%, generated by national and international tourists3. The basin is one of the most important archeological resources in South America. Inca cosmology believes that the Lake is the origin of human life; various cultures have continuously lived near the Lake for over 8,000 years. The area provides evidence of one the longest constant relations between humans and nature in the Americas. Ancient traditions are still largely preserved and the rural population Public Disclosure Authorized surrounding the Lake is almost all indigenous Aymara. Despite the Lake’s unique natural history and preserved cultural integrity, pollution is starting to threaten the health of the Lake and the sustainability of the communities that depend on the Lake for their livelihoods. The communities surrounding the Lake are among the poorest in the region. Poverty levels have stubbornly remained at 1976 levels – therefore a long-term sustained improvement, based on relevant local economic development, broad based local support, and locally applicable interventions is most likely to succeed. The total population of the 17 municipalities that make up the Lake Titikaka Mancomunidad is approximately 324,400, of which 93% have unmet basic needs. Almost all of the 1 Lake Titikaka is part of the hydrologic basin that includes the Desaguadero River, Lake Poopó, and Salar de Coipasa (often referred to as TDPS), located on the Bolivian-Peruvian high plateau (altiplano). This project area is Public Disclosure Authorized limited to the 17 Bolivian municipalities that make up the Mancomunidad part of the ‘altiplano’. 2 Lake Titikaka is a UNESCO World Heritage site, parts of the Lake are designated national reserves under IUCN Category VI, and the entire Lake is a designated Ramsar site of vulnerable ecosystems and ancient cultures. The entire TDPS basin contains six Ramsar sites of global importance. Lake Titikaka has over 25 endemic species. 3 Almost half of the international tourists come from Latin-America (49%), followed by European countries (32%) and American (11%). In the first semester of 2006, tourism increased by 21% compared to the same period in 2005 altiplano’s rural population lives in poverty. Morbidity and infant mortality rates are among the worst in the Americas4. Although there are various opinions on what pollutants and land-use changes most threaten Lake Titikaka, many of these opinions have little technical support, and some are politically driven. Despite numerous studies on the Lake there is no accepted or consistent baseline data, nor community consensus on priorities for local economic development or ecosystem protection. International donor assistance in the Lake-area is often fragmented and complicated by joint Peru-Bolivia jurisdiction. Many issues need to be addressed to foster sustainable development of the Lake Titikaka region. For example: (i) Community Support. Historically communities around the Lake often feel excluded from national economic growth and the political decision making process, and there is increasing impatience with the levels of inequality5. This discontent can be exacerbated when, according to the Government’s National Tourism Plan, community-based tourism, with a 71% market share receives only 5% of the overall tourism revenues. Private operators obtain about 80% of tourist revenues. Much of the community’s discontent stems from a mistrust and misunderstanding of the private sector’s needs and abilities. (ii) Stakeholder Participation. The Government’s newly development Tourism plan is predicated on broad stakeholder participation. Any new tourism effort needs to garner greater public support and this support needs to be developed in a manner that reflects the unique local cultures and organizations. (iii) Weak institutional and planning capacity. In 1994 the central government delegated to the municipalities the responsibility of managing their own finances and providing specified public services (Ley de Participación Popular6). This was not matched with a commensurate increase in overall municipal finances or staff capacities. Long term strategic planning is particularly absent and un-checked and inappropriate growth is threatening the Lake and local communities. (iv) Lack of infrastructure. There is a considerable backlog in infrastructure and basic services such as water supply, sewage, and solid waste management are sporadic and unsustainable. Management of EPSAs (local utilities) is hampered by staff capacities and poor cost recovery. (v) Very low travel and tourism competitiveness. Along with basic services, tourism infrastructure such as signage, and visitor interpretation facilities and restrooms in main tourist sites around Lake Titikaka (Copacabana, Isla del Sol and Luna, and the ruins of Tiwanaku), is lacking. The lack of facilities constrains tourism development, as seen through: (a) higher transaction costs for tourist operators; (b) disincentives for tourists to stay 4 La Paz Prefecture has an infant mortality rate of 115/1000 compared to Haiti’s 94/1000. Morbidity rates are: 49% due to environment related infections; 25% are water borne ailments; 24% due to influenza and common cold. 5 Bolivia is among the most unequal countries in the most unequal region of the word. This, combined with a low per capita GDP, contributes to the high poverty levels of the country. 6 Popular Participation Law or Ley de Participación Popular (1994) initiated a process of decentralization designed to transfer resources and responsibilities to local governments and strengthen the capacity and participation of municipalities and civil society organizations. The Central government allocates 20% of the national taxes to the municipalities. longer at their final destination as evidenced by the amount of time spent by tourists at the Lake Titikaka region compared to other regions in the country7; and, (c) lack of competitiveness compared to other international tourist destinations. According to the World Economic Forum8 Bolivia is ranked very low in global tourism competitiveness (see Table1), when compared to international destinations for the largely international market. Table 1. Travel and tourism competitiveness (vi) Lack of economies of scale. Despite the fact that 80,000 to 100,000 tourists annually visit the Bolivian side of Lake Titikaka, the size of the economy of this part of the Lake is small and spread over a very large geographic area. Communities are relatively small and are dispersed throughout the region and the migration of people to La Paz is considerable. There are few economic activities to provide incentives for retaining or increasing populations. (vii) Environmental sensitivity. Lake Titikaka is a unique lake in that it is almost a closed system with about 95% of its total influent water evaporating due to strong solar radiation and local breezes. About 80% of the Lake’s water originates in Peru, rivers and streams provide about 45% of the water input to the Lake, the rest is local precipitation. Residence time for the whole Lake is about 70 years. Average water depth is 100 meters with the deepest at 281 meters. The Lake is divided into two lacustrine basins; the “minor lake” (or Huinaimarca) and the “major lake” (or Chucuito) are connected at the Tiquina Straight which is 850 meters wide and about 20 meters deep. Lake levels fluctuate annually by about 1 meter and over the last 100 years have fluctuated from a low of 3806 meters asl in 1943 to a high of 3812 meters asl in 1982. As outlined in the Sate of the Lake report (Annex 14) the Lake’s watershed drains an area of 140,000 km2. The watershed is believed to be undergoing a long term drying trend, most likely from hemispheric climate changes. 7 Lake Titikaka is one of the most visited regions in the country but the amount of time spent by tourists is less then more distant destinations like the Amazonic Triangle and the Cochabamba Tropic 8 World Economic Forum, Travel and Competitiveness report 2007. The travel and tourism index measures the factors that make it attractive to develop the travel and tourism industry of individual countries and covers 124 countries. Bolivia ranks 109th. Glaciers that feed the lake are melting rapidly – the potential overall impact of climate change on the Lake is not yet well understood. (viii) Threats to the Lake include: climate variability and possible change; inadequate water resources regulations; pollution such as organic loading